India Culture, Business, Sports and Food. Get all the buzz in India now

Crude oil prices in the International Market have crossed the $125 mark and have put the Indian government in a tight spot. During the time of the present government the oil prices have been kept on soaring .Now the prices of crude oil has arisen to such an extent that the Center Government cannot avoid the decision of raising the price of oil from 10 to 15 rupees per litter. On one hand the subsidies in petroleum are mounting and on the other hand if the decision is implemented then wrong political signals will go out.

During the rule of Manmohan government the prices of crude oil soared from $40 to $125 per barrel in the International Market. The government can either raise the fuel prices or can let the state-owned oil companies slide into red. Oil companies have been left with a very low cash flow if they are not bailed out of their present situation then the supply of oil will be affected and will increase the problems of the government. This became evident from Singh’s statement on tuesday when he said that, “We will not allow (government-run) oil companies to suffer, it is a big problem”. Government can not ignore the present situation as the economic situation of the state owned oil companies is worsening day by day and can lead to scarcity of petroleum products.

During the rule of the Manmohan government the prices of the essential commodities have arisen a lot .Further increase in oil prices will affect the whole economy and will affect the prices of everything. Manmohan government has almost completed four years and the Lock Sabha elections will be held after one year. As the assembly elections are scheduled to be held in some states in the near future, the present situation has put the government in a very tight situation. Congress has already lost the Karnataka elections to BJP. And any decision regarding massive increase in oil prices will harm the Party’s political interests. Rising inflation will affect the lowest and middle sections of the Indian society, which will harm the possibilities of returning to power of the ruling party.

I

Indian government cannot control the international oil prices because they are decided by OPEC. Rising prices have remained the reason of the criticism for the government in the past and the further increase will become the reason of more criticism for the government. There are very limited options for the government and it will have to chose either of them whether it suits the political interests or not.